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A Waste of a Generation

Social conflict may rear its head as graduates with reduced opportunities are forced to fund their profligate predecessors’ generous benefits.

Even though baby boomers caused terrible anguish to their parents while going through adolescence and early adulthood in the 1960s and 1970s, they themselves enjoyed a remarkably peaceful relationship with their own kids. The subsequent generations — and there have already been several of them, from the Baby Bust to the Me Generation to Generation X and so on— didn’t bury themselves in counterculture, shunned youth protests and in general seemed to be if not old-school respectful, at least non-confrontational with their Mom and Dad. The inter-generational conflict, much discussed 45 years ago, seems to be off the agenda.

It may now be starting to change as economic opportunities for those who are freshly out of college and even professional schools are starting to narrow, whereas the bill for half-a-century of profligate living is suddenly coming due.

Economic Opportunities

There were many reasons why the baby boomers proved so troublesome, but lack of opportunity for economic advancement was probably the main one. The prosperity of the 1950s and 1960s was based on an orderly consensus: Companies provided life-long employment as well as pensions and medical benefits, and unionized blue-collar and public sector jobs paid good salaries and offered advancement for longevity, not skill or ambition. Western economies prospered and millions of ordinary people had a nice place to live, owned a car and didn’t worry where their next paycheck came from.

For a generation that had lived through the Depression and World War II it was a godsend, but the orderly and predictable system lacked opportunities for a huge wave of young people who were rapidly coming of age. Unemployment started out low in the late 1960s but it was consistently high for recent graduates, and the situation kept getting worse as the 1970s progressed. As millions of baby boomers began to join the workforce, the system came under strain. By the mid-1970s, the Western economy was suffering from stagflation — the combination of high unemployment and inflation which economists had previously thought could never happen. Only after reforms in the mid-1980s, the Reagan-Thatcher years, did recent graduates — the Baby Bust generation — begin to see a much freer, more entrepreneurial environment, with better job prospects and greater economic opportunities.

The culmination of this process came in the 1990s with the information technology revolution and the dot-com boom. It had many aspects of a financial bubble, with fly-by-night Internet start-ups making their founders overnight millionaires, but it was also one of the most productive and inventive decades of the 20th century. Technologies introduced and commercialized at the time and the highly competitive, entrepreneurial environment endure to this day. The 1990s also confirmed the United States as the world’s topmost innovator — a position it had previously been thought to have lost to the Japanese.

That revolution was shaped by the energies, skills and imagination of people in their twenties. It was the best time to be young: Kids about to graduate from college were actively recruited by businesses routinely offering them six-figure salaries.

Back to the Unemployment Line

Such opportunities naturally closed when the Internet bubble burst, but they have not been recaptured since. Rather, it is the other way around. Since the collapse of the mortgage bubble in 2008 and the advent of the Great Recession, the huge unemployment problem that is now dogging the U.S. economy has fallen disproportionately heavily on the shoulders of younger generations. The unemployment rate among teenagers in the United States, after going all the way down to 13 percent at the end of the dot-com era, rocketed after 2008 and remains persistently above 25 percent.

Actually, new graduates have faced dismal job prospects since 2007. Most recent graduates don’t show up in unemployment statistics because they don’t collect benefits. Some have chosen to go to graduate school in order not to be looking for work in an extremely difficult environment, while others have moved in with their parents and taken up part-time or unskilled work. In addition to 8 million jobs lost since the start of 2008, there have also been millions of jobs not created to accommodate the natural rate of expansion of the labor force. In all, there have now been three graduating classes without meaningful work, the Class of ’11 is hardly going to fare better and economists believe that the labor market will remain depressed for another several years. When employers begin hiring entry-level workers once more, they will opt for new graduates rather than for people who had spent years looking for work. This effectively amounts to a lost generation.

Ironically, the population explosion and the fact that they have so many young people as a percentage of their overall population have been considered major impediments to the economic development of countries in Asia and Latin America. Now, however, these new generations have moved into their twenties and all of a sudden, countries which are growing fastest and which are believed to have the best economic growth prospects for the future are the ones with a young population, notably India and Brazil. They are increasingly relying on the skills, energies and ambitions of their young citizens.

Countries that have aging populations, on the other hand, are stagnating, Japan being the most notable example. But the United States, too, is suddenly wasting the most productive years of an entire generation, a time right after college when they are eager to work hard and learn on the job for relatively little pay.

Worse, our educational system is saddling the kids with an insurmountable debt burden. When jobs were plentiful in the 1990s, it made sense for the cost of college education to rise rapidly. It was, after all, clearly a worthwhile investment. But now jobs are scarce and pay little while tuition and other college costs are still on the rise. It is a dead-end situation both for colleges and for graduates. Even law and medical schools no longer guarantee a well-paying job. Yet, graduating young professionals are now routinely facing debts of $300,000 or more. Even if they find a job, you can’t expect people laden with such debts to be risk-takers.

Generational Conflict

In the United States, rising unemployment among young people hasn’t yet led to an intensified conflict between generations, but it probably will soon. Western Europe, where budget cuts hit Britain, France and Italy and riots protesting those cuts ensued, provides a blueprint for coming strife.

At first glance, it is easy to dismiss such riots as unreasonable demands for more entitlements on the part of people weaned on socialist handouts. But it is worth analyzing the nature of those protests on a deeper level. In Europe, as in the United States, students are facing a very grim future with no job openings and few opportunities to advance. They see a generation of baby boomers — their parents’ generation — who enjoyed free education, secure, well-paying jobs and steady careers, and who are now preparing to retire at age 60 to full pensions and medical benefits. The new generation will be asked to pay for all those benefits out of their meager salaries while at the same time they are being told that the baby boomers have eaten the entire pie and that they will have to pay more for their education, work harder for less money and retire at a later age — because there is no money left in the till for them.

It may be different in Europe, but anger against high-living oldsters will likely well up on this side of the Atlantic as well. Social Security and Medicare are bankrupting the state while those who are now working to support such open-ended programs are warned not to count on them when they reach the age of retirement. Recent graduates probably would have gladly supported the retirees if they had a good job and a bright future, but not when they themselves are struggling to keep their heads above water.